MODULE - 7

Marketing
Management

20
MARKETING MIX
Notes

In the previous lesson you learnt that marketing identifies consumers’ needs and supplies
various goods and services to satisfy those needs most effectively. So the businessman
needs to: (a) produce or manufacture the product according to consumers’ need; (b)
make available it at a price that the consumers’ find reasonable; (c) supply the product
to the consumers at different outlets they can conveniently approach; and (d) inform
the consumers about the product and its characteristics through the media they have
access to.
So the marketing manager concentrates on four major decision areas while planning
the marketing activities, namely, (i) products, (ii) price, (iii) place (distribution) and
(iv) promotion. These 4 ‘P’s are called as elements of marketing and together they
constitute the marketing mix. All these are inter-related because a decision in one area
affects decisions in other areas. In this lesson you will learn about the basic aspects
relating to these 4‘P’s viz., product, price, place and promotion.

OBJECTIVES
After studying this lesson, you will be able to :
• explain the concept of marketing mix and its components;
• explain the meaning of product and its classification;
• state the various factors affecting pricing decisions;
• describe different methods of pricing;
• state the meaning of channels of distribution;
• identify the various channels of distribution;

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• state the factors affecting choice of a channel of distribution; and
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• explain the concepts of promotion and promotion mix.
20.1 CUSTOMER : KING OF THE MAEKET
Now a day the customer is considered as the king of the market. Thus all the firms
should constrate on customers requirement and satisfaction. Now a day compinies are
shaping seperate offers, services and messages to indiviusals customers. Many
companies collect information on each customers past transaction, demographics, Notes
psyphographics, and media and distribution references. They hope to achieved profitable
growth through capturing a larger share of each customers expenditure by building high
customer loylty and focusing on customer life time value.

20.2 CONCEPT AND COMPONENTS OF MARKETING MIX

Marketing involves a number of activities. To begin with, an organisation may decide
on its target group of customers to be served. Once the target group is decided, the
product is to be placed in the market by providing the appropriate product, price,
distribution and promotional efforts. These are to be combined or mixed in an appropriate
proportion so as to achieve the marketing goal. Such mix of product, price, distribution
and promotional efforts is known as ‘Marketing Mix’.

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Management According to Philip Kotler “Marketing Mix is the set of controllable variables that the
firm can use to influence the buyer’s response”. The controllable variables in this
context refer to the 4 ‘P’s [product, price, place (distribution) and promotion]. Each
firm strives to build up such a composition of 4‘P’s, which can create highest level of
consumer satisfaction and at the same time meet its organisational objectives. Thus,
this mix is assembled keeping in mind the needs of target customers, and it varies from
one organisation to another depending upon its available resources and marketing
Notes objectives. Let us now have a brief idea about the four components of marketing mix.
• Product : Product refers to the goods and services offered by the organisation. A
pair of shoes, a plate of dahi-vada, a lipstick, all are products. All these are
purchased because they satisfy one or more of our needs. We are paying not for
the tangible product but for the benefit it will provide. So, in simple words, product
can be described as a bundle of benefits which a marketeer offers to the consumer
for a price. While buying a pair of shoes, we are actually buying comfort for our
feet, while buying a lipstick we are actually paying for beauty because lipstick is
likely to make us look good. Product can also take the form of a service like an
air travel, telecommunication, etc. Thus, the term product refers to goods and
services offered by the organisation for sale.
• Price : Price is the amount charged for a product or service. It is the second most
important element in the marketing mix. Fixing the price of the product is a tricky
job. Many factors like demand for a product, cost involved, consumer’s ability to
pay, prices charged by competitors for similar products, government restrictions
etc. have to be kept in mind while fixing the price. In fact, pricing is a very crucial
decision area as it has its effect on demand for the product and also on the
profitability of the firm.
• Place : Goods are produced to be sold to the consumers. They must be made
available to the consumers at a place where they can conveniently make purchase.
Woollens are manufactured on a large scale in Ludhiana and you purchase them
at a store from the nearby market in your town. So, it is necessary that the product
is available at shops in your town. This involves a chain of individuals and institutions
like distributors, wholesalers and retailers who constitute firm’s distribution network
(also called a channel of distribution). The organisation has to decide whether to
sell directly to the retailer or through the distributors/wholesaler etc. It can even
plan to sell it directly to consumers. The choice is guided by a host of factors
about which you will learn later in this chapter.
• Promotion : If the product is manufactured keeping the consumer needs in mind,
is rightly priced and made available at outlets convenient to them but the consumer
is not made aware about its price, features, availability etc, its marketing effort

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may not be successful. Therefore promotion is an important ingredient of marketing
Management
mix as it refers to a process of informing, persuading and influencing a consumer
to make choice of the product to be bought. Promotion is done through means of
personal selling, advertising, publicity and sales promotion. It is done mainly with
a view to provide information to prospective consumers about the availability,
characteristics and uses of a product. It arouses potential consumer’s interest in
the product, compare it with competitors’ product and make his choice. The
proliferation of print and electronic media has immensely helped the process of
Notes
promotion.
Marketing Mix : A bird’s eye view
Price

Target
Product Promotion
Customer

Place
(Distribution)

Having acquainted ourselves with the broad nature of the four components of marketing
mix, let us now learn some important aspects of each one of these in detail in the
following sections.

INTEXT QUESTIONS 20.1

1. List the four components of marketing mix
2. Give one word/phrase for the following statements :
(a) The crucial decision area of marketing that has direct effect on demand for
the product and profitability of the firm.
(b) The component of marketing that relates to channels of distribution.
(c) The components that are combined to achieve the marketing goal.
(d) The goods and services offered by the organisation for sale.
(e) The ingredient of marketing mix relating to informing, persuading and
influencing a consumer to make choice of the product to be bought.

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Management 20.3 CONCEPT OF PRODUCT AND ITS CLASSIFICATION
As stated earlier, product refers to the goods and services offered by the organisation
for sale. Here the marketers have to recognise that consumers are not simply interested
in the physical features of a product but a set of tangible and intangible attributes that
satisfy their wants. For example, when a consumer buys a washing machine he is not
buying simply a machine but a gadget that helps him in washing clothes. It also needs to
be noted that the term product refers to anything that can be offered to a market for
Notes attention, acquisition, or use. Thus, the term product is defined as “anything that can be
offered to a market to satisfy a want”. It normally includes physical objects and services.
In a broader sense, however, it not only includes physical objects and services but also
the supporting services like brand name, packaging accessories, installation, after sales
service etc. Look at the definitions by Stanton and McCarthy as given in the box.
Product
“Product is a set of tangible and intangible attributes including packaging, colour,
price, manufacturer’s prestige, retailer’s prestige and manufacturer’s and
retailer’s services which buyer may accept as offering satisfaction of wants and
services”. ..... William J. Stanton
“A product is more than just a physical product with its related functional and
aesthetic features. It includes accessories, installation, instructions on use, the
package, perhaps a brand name, which fulfills some psychological needs and
the assurances that service facilities will be available to meet the customer
needs after the purchase”. ..... Jerome McCarthy
Product Classification
Product can be broadly classified on the basis of (1) use, (2) durability, and (3) tangibility.
Let us have a brief idea about the various categories and their exact nature under each
head, noting at the same time that in marketing the terms ‘product’ and ‘goods’ are
often used interchangeably.
1. Based on use, the product can be classified as:
(a) Consumer goods : Goods meant for personal consumption by the households
or ultimate consumers are called consumer goods. This includes items like toiletries,
groceries, clothes etc. Based on consumers’ buying behaviour the consumer goods
can be further classified as :
(i) Convenience Goods : Do you remember, the last time when did you buy a
packet of butter or a soft drink or a grocery item? Perhaps you don’t
remember, or you will say last week or yesterday. Reason is, these goods
belong to the categories of convenience goods which are bought frequently

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without much planning or shopping effort and are also consumed quickly.
Management
Buying decision in case of these goods does not involve much pre-planning.
Such goods are usually sold at convenient retail outlets.
(ii) Shopping Goods : These are goods which are purchased less frequently
and are used very slowly like clothes, shoes, household appliances. In case
of these goods, consumers make choice of a product considering its suitability,
price, style, quality and products of competitors and substitutes, if any. In
other words, the consumers usually spend a considerable amount of time
Notes
and effort to finalise their purchase decision as they lack complete information
prior to their shopping trip. It may be noted that shopping goods involve
much more expenses than convenience goods.
(iii) Speciality Goods : Because of some special characteristics of certain
categories of goods people generally put special efforts to buy them. They
are ready to buy these goods at prices at which they are offered and also put
in extra time to locate the seller to make the purchase. The nearest car dealer
may be ten kilometres away but the buyer will go there to inspect and purchase
it. In fact, prior to making a trip to buy the product he/she will collect complete
information about the various brands. Examples of speciality goods are
cameras, TV sets, new automobiles etc.
(b) Industrial Goods : Goods meant for consumption or use as inputs in production
of other products or provision of some service are termed as ‘industrial goods’.
These are meant for non-personal and commercial use and include (i) raw materials,
(ii) machinery, (iii) components, and (iv) operating supplies (such as lubricants,
stationery etc). The buyers of industrial goods are supposed to be knowledgeable,
cost conscious and rational in their purchase and therefore, the marketeers follow
different pricing, distribution and promotional strategies for their sale.
It may be noted that the same product may be classified as consumer goods as
well as industrial goods depending upon its end use. Take for example the case of
coconut oil. When it is used as hair oil or cooking oil, it is treated as consumer
goods and when used for manufacturing a bath soap it is termed as industrial
goods. However, the way these products are marketed to these two groups are
very different because purchase by industrial buyer is usually large in quantity and
bought either directly from the manufacturer or the local distributor.
2. Based on Durability, the products can be classified as :
(a) Durable Goods : Durable goods are products which are used for a long period
i.e., for months or years together. Examples of such goods are refrigerator, car,
washing machine etc. Such goods generally require more of personal selling efforts
and have high profit margins. In case of these goods, seller’s reputation and pre-
sale and after-sale service are important determinants of purchase decision.

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Management (b) Non-durable Goods : Non-durable goods are products that are normally
consumed in one go or last for a few uses. Examples of such products are soap,
salt, pickles, sauce etc. These items are consumed quickly and we purchase these
goods more often. Such items are generally made available by the producer through
large number of convenient retail outlets. Profit margins on such items are usually
kept low and heavy advertising is done to attract people towards their trial and
use.
Notes 3. Based on tangibility, the products can be classified as:
(a) Tangible Goods : Most goods, whether these are consumer goods or industrial
goods and whether these are durable or non-durable, fall in this category as they
have a physical form, that can be touched and seen. Thus, all items like groceries,
cars, raw-materials, machinery etc. fall in the category of tangible goods.
(b) Intangible Goods : Intangible goods refer to services provided to the individual
consumers or to the organisational buyers (industrial, commercial, institutional,
government etc.). Services are essentially intangible activities which provide want
or need satisfaction. Medical treatment, postal, banking and insurance services
etc., all fall in this category.

Products

Based on Use Based on Durability Based on Tangibility

Consumer Industrial Durable Non-Durable Tangible Intangible

Goods Goods (Goods) (Services)

Convenience Shopping Speciality

Goods Goods Goods

Raw Machinery Components Operating

materials Supplies

20.4 COMPONENTS OF PRODUCT MIX

In order to optimise the product requirements by the consumers, importance should be
given to the following elements or components of product mix :
1. Branding : It is the process of using a name, sign, symbol or design to a product.
A brand is an identification of a product. The part of the brand which can be
spoken is called the brand name e.g., Detol, Nike etc. The part of brand which

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cannot be spoken but can be recognised is the brand mark. e.g. arrow sign of
Management
Nike, star of Mercedz etc. A brand that is given legal protection against its use by
other firms is called trade mark. e.g., is the trade mark of State Bank of India.
Customers demand the product by calling its brand name. For e.g. give one Lux,
one Coke etc. Thus, it helps in product differentiation. Branding help companies
to adopt differential pricing for its product. Customers are ready to accept that
price because of its quality. Companies which use their brand name find it easy to
market a new product.
Notes
2. Packaging : It is the act of designing and producing appropriate container or
cover for the product.
Level of Packing : There are three levels of packaging. These are:
i. Primary Package : It refers to immediate packing of product. e.g., tube of
ointment.
ii. Secondary Package : It refers to additional packaging which gives protection
to the product. e.g., Cardboard box used to keep ointment tube. Such
containers and boxes are dispensed units where we start using the inside
material from the primary package.
iii. Transportation Packaging or Final Packaging : It refers to further
packaging components necessary for storage or transportation. e.g., boxes
of ointments are transported in corrugated boxes each containing 50/100
items.
Packaging protects the product from damage. It helps to identify a product. It
enables convenient handling of the product. As package increases the sale of a
product, it acts as a silent salesman.
3. Labeling : Label is a part on the cover of the product which will devote its name,
contents, ownership, expiry date, manufacturing date etc. A label helps in identifying
the product. It is full of information about the product. It helps in grading the
product. It attracts customers because of its colourful packing.

INTEXT QUESTIONS 20.2

1. Classify the following products into consumer goods and industrial goods and
further classify them into convenience goods, shopping goods and speciality goods,
if they are consumer goods :
(a) Stationery for the office (b) Washing machine for use at home
(c) A car for the family use (d) Oil for manufacturing soap
(e) A pair of shoes for yourself

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(f) An electric lift for lifting weight in the workshop
Management
(g) A packet of biscuits for your breakfast

2. For the following categories of goods, give two examples of each, from the products
that you see around you :

(a) Intangible goods (b) Durable goods (c) Non-durable goods

Notes 3. (a) The following words refers to tangible and intangible products. You are required
to put these products into their right class in the appropriate boxes.

(i) Cricket Bat (ii) Ball (iii) Boarding a bus

(iv) ‘Pollution check’ (v) Pen

(vi) Getting medical advice from a Doctor

Tangible Intangible

(b) The following is a list of durable and non durable consumer goods. You are
required to put them in the appropriate boxes.

(i) Refrigerator (ii) Salt

(iii) Soap (iv) Washing Machine

(v) Television (vi) Cooking oil

(vii) Sauce (viii) Note Book

Durable Non-Durable

20.5 PRICING AND FACTORS AFFECTING PRICING

DECISIONS
As stated earlier price is the consideration in terms of money paid by consumers for the
bundle of benefits he/she derives by using the product/ service. In simple terms, it is the
exchange value of goods and services in terms of money. Pricing (determination of
price to be charged) is another important element of marketing mix and it plays a
crucial role in the success of a product in the market. If the price fixed is high, it is likely
to have an adverse effect on the sales volume. If, on the other hand, it is too low, it will
adversely affect the profitability. Hence, it has to be fixed after taking various aspects
into consideration. The factors usually taken into account while determining the price
of a product can be broadly described as follows:

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(a) Cost : No business can survive unless it covers its cost of production and
Management
distribution. In large number of products, the retail prices are determined by adding
a reasonable profit margin to the cost. Higher the cost, higher is likely to be the
price, lower the cost lower the price.

(b) Demand : Demand also affects the price in a big way. When there is limited
supply of a product and the demand is high, people buy even if high prices are
charged by the producer. But how high the price would be is dependent upon
Notes
prospective buyers’ capacity and willingness to pay and their preference for the
product. In this context, price elasticity, i.e. responsiveness of demand to changes
in price should also be kept in view.

(c) Competition : The price charged by the competitor for similar product is an
important determinant of price. A marketeer would not like to charge a price
higher than the competitor for fear of losing customers. Also, he may avoid charging
a price lower than the competitor. Because it may result in price war which we
have recently seen in the case of soft drinks, washing powder, mobile phone etc.

(d) Marketing Objectives : A firm may have different marketing objectives such as
maximisation of profit, maximisation of sales, bigger market share, survival in the
market and so on. The prices have to be determined accordingly. For example,
if the objective is to maximise sales or have a bigger market share, a low price will
be fixed. Recently one brand of washing powder slashed its prices to half, to grab
a bigger share of the market.

(e) Government Regulation : Prices of some essential products are regulated by

the government under the Essential Commodities Act. For example, prior to
liberalisation of the economy, cement and steel prices were decided by the
government. Hence, it is essential that the existing statutory limits, if any, are also
kept in view while determining the prices of products by the producers.

20.6 METHODS OF PRICE FIXATION

Methods of fixing the price can be broadly divided into the following categories.

1. Cost Based Pricing : Under this method, price of the product is fixed by adding
the amount of desired profit margin to the cost of the product. If a particular soap
costs the marketeer Rs. 8 and he desires a profit of 25%, the price of the soap is
fixed at Rs 8 + (8x25/100) =Rs. 10. While calculating the price in this way, all
costs (variable as well as fixed) incurred in manufacturing the product are taken
into consideration.

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2. Competition Based Pricing : In case of products where market is highly
Management
competitive and there is negligible difference in quality of competing brands, price
is usually fixed closer to the price of the competing brands. It is called ‘young rate
pricing’ and is a very convenient method because the marketeers do not have to
worry much about demand and cost and effect the change as per the changes by
the industry leaders.
3. Demand Based Pricing : At times, prices are determined by the demand for the
product. Under this method, without paying much attention to cost and competitors
Notes
prices, the marketeers try to ascertain the demand for the product. If the demand
is high they decide to take advantage and fix a high price. If the demand is low,
they fix low prices for their product. At times they resort to differential prices and
charge different prices from different groups of customers depending upon their
perceived values and capacity to pay. Take the case of cinema halls where the
rates of tickets differ for the different sets of rows in the hall.
4. Objective Based Pricing : This method is applicable to introduction of new
(innovative) products. If, at the introductory stage of the products, the organisation
wishes to penetrate the market i.e., to capture large parts of the market and
discourage the prospective competitors to enter into the fray, it fixes a low price.
Alternatively, the organisation may decide to skim the market i.e., to earn high
profit by taking advantage of a group of customers who give more importance to
their status or distinction and are willing to pay even a higher price for it. In such
a situation they fix quite high price at the introductory stage of their product and
market it to only those customers who can afford it.

INTEXT QUESTIONS 20.3

1. List the main factors affecting pricing decision of a firm.
2. Which method of price fixation is being referred to here :
(a) Hari fixes the price of shirts that he manufactures and sells at a price 10%
higher than its cost.
(b) Mannat introduces a new brand of biscuits at a low introductory price.
(c) Sheetal fixes the price of her glassware keeping in mind the prices for similar
products in the nearby shops.
(d) Rahul, a fruit-seller increases the price of mangoes if there is a heavy demand
for them during the summer season.
(e) Pinky charges a high price for the exclusive designer handkerchiefs that she
designs for a selective group of customers.

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(f) Jahanavi lowers the price of the vegetables at her shop in the evening, so that
Management
customers purchase them even when they are not as fresh as they were in the
morning time.
20.7 CHANNELS OF DISTRIBUTION
You are aware that while a manufacturer of a product is located at one place, its
consumers are located at innumerable places spread all over the country or the world.
The manufacturer has to ensure the availability of his goods to the consumers at
convenient points for their purchase. He may do so directly or, as stated earlier, through Notes
a chain of middlemen like distributors, wholesalers and retailers. The path or route
adopted by him for the purpose is known as channel of distribution. A channel of
distribution thus, refers to the pathway used by the manufacturer for transfer of the
ownership of goods and its physical transfer to the consumers and the user/buyers
(industrial buyers).
Stanton has also defined it as “A distribution channel consists of the set of people and
firms involved in the transfer of title to a product as the product moves from producer
to ultimate consumer or business user”. Basically it refers to the vital links connecting
the manufacturers and producers and the ultimate consumers/users. It includes both
the producer and the end user and also the middlemen/agents engaged in the process
of transfer of title of goods.
Primarily a channel of distribution performs the following functions:
(a) It helps in establishing a regular contact with the customers and provides them the
necessary information relating to the goods.
(b) It provides the facility for inspection of goods by the consumers at convenient
points to make their choice.
(c) It facilitates the transfer of ownership as well as the delivery of goods.
(d) It helps in financing by giving credit facility.
(e) It assists the provision of after sales services, if necessary.
(f) It assumes all risks connected with the carrying out the distribution function.
Types of Channels of Distribution
Generally we do not buy goods directly from the producers. The producers/
manufacturers usually use services of one or more middlemen to supply their goods to
the consumers. But sometimes, they do have direct contact with the customers with no
middlemen in between them. This is true more for industrial goods where the customers
are highly knowledgeable and their individual purchases are large. The various channels
used for distribution of consumer goods can be described as follows:

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(a) Zero Stage Channel of Distribution : Zero stage distribution channel exists
Management
where there is direct sale of goods by the producer to the consumer. This direct
contact with the consumer can be made through door-to-door salesmen, own
retail outlets or even through direct mail. Also in case of perishable products and
certain technical household products, door-to-door sale is an easier way of
convincing consumer to make a purchase. Eureka Forbes, for example, sells its
water purifiers directly through their own sales staff.
Notes

M C
Manufacture Customer

(b) One Stage Channel of Distribution : In this case, there is one middleman i.e.,
the retailer. The manufacturers sell their goods to retailers who in turn sell it to the
consumers. This type of distribution channel is preferred by manufacturers of
consumer durables like refrigerator, air conditioner, washing machine, etc. where
individual purchase involves large amount. It is also used for distribution through
large scale retailers such as departmental stores (Big Bazaar, Spensors) and super
markets.

M R C
Manufacture Retailer Customer

(c) Two Stage Channel of Distribution : This is the most commonly used channel
of distribution for the sale of consumer goods. In this case, there are two middlemen
used, namely, wholesaler and retailer. This is applicable to products where markets
are spread over a large area, value of individual purchase is small and the frequency
of purchase is high.

M W R C
Manufacture Wholesaler Retailer Customer

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(d) Three Stage Channel of Distribution : When the number of wholesalers used
Management
is large and they are scattered throughout the country, the manufacturers often use
the services of mercantile agents who act as a link between the producer and the
wholesaler. They are also known as distributors.

M A W R C
Manufacture Agents Wholesaler Retailer Customer Notes

INTEXT QUESTIONS 20.4

1. Give any four important functions performed by a channel of distribution.
2. Which type of channel of distribution will be suitable in each of the following
cases? Name it and draw a labelled diagram (in the space given below) depicting
the channel.
(a) For a perishable product
(b) Where large number of wholesalers are involved and are scattered throughout
the country.
(c) For durable products like washing machines.

20.8 FACTORS AFFECTING THE CHOICE OF

DISTRIBUTION CHANNEL
Choice of an appropriate distribution channel is very important as the pricing as well as
promotion strategy are dependent upon the distribution channel selected. Not only
that, the route which the product follows in its journey from the manufacturer to the
consumer also involves certain costs. This in turn, affects not only the price of the
product but also the profits. Choice of inappropriate channels of distribution may result
in lesser profits for the manufacturer and higher price from the consumer. Hence, the
manufacturer has to be careful while finalising the channel of distribution to be used.
He should pay attention to the following factors while making his choice.
(a) Nature of Market : There are many aspects of market which determine the
choice of channel of distribution. Say for example, where the number of buyers is
limited, they are concentrated at few locations and their individual purchases are
large as is the case with industrial buyers, direct sale may be the most preferred
choice. But in case where number of buyers is large with small individual purchase
and they are scattered, then need may arise for use of middlemen.

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(b) Nature of Product : Nature of the product considerably affects the choice of
Management
channel of distribution. In case the product is of technical nature involving a good
amount of pre-sale and after sale services, the sale is generally done through
retailers without involving the wholesalers. But in most of the consumer goods
having small value, bought frequently in small quantities, a long channel involving
agents, wholesalers and retailers is used as the goods need to be stored at
convenient locations. Items like toiletries, groceries, etc. fall in this category. As
against this in case of items like industrial machinery, having large value and involving
Notes
specialised technical service and long negotiation period, direct sale is preferred.
(c) Nature of the Company : A firm having enough financial resources can afford to
have its own distribution force and retail outlet, both. But most business firms
prefer not to create their own distribution channel and concentrate on manufacturing.
The firms who wish to control the distribution network prefer a shorter channel.
(d) Middlemen Consideration : If right kind of middlemen having the necessary
experience, contacts, financial strength and integrity are available, their use is
preferred as they can ensure success of newly introduced products. Cost factors
also have to be kept in view as all middlemen add their own margin of profit to the
price of the products. But from experience it is learnt that where the volume of
sales are adequate, the use of middlemen is often found economical and less
cumbersome as against direct sale.
20.9 PROMOTION
Promotion refers to the process of informing and persuading the consumers to buy
certain product. By using this process, the marketeers convey persuasive message and
information to its potential customers. The main objective of promotion is to seek
buyers’ attention towards the product with a view to:
• arouse his interest in the product;
• inform him about its availability; and
• inform him as to how is it different from others.
It is thus a persuasive communication and also serves as a reminder. A firm uses different
tools for its promotional activities which are as follows :
• Advertising • Publicity
• Personal selling • Sales promotion
These are also termed as four elements of a promotion mix. Let us have a brief idea
about these promotion tools.

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1. Advertising : Advertising is the most commonly used tool for informing the present
Management
and prospective consumers about the product, its quality, features, availability,
etc. It is a paid form of non-personal communication through different media
about a product, idea, a service or an organisation by an identified sponsor. It can
be done through print media like newspaper, magazines, billboards, electronic
media like radio, television, etc. It is a very flexible and comparatively low cost
tool of promotion.
2. Publicity : This is a non-paid process of generating wide range of communication
Notes
to contribute a favourable attitude towards the product and the organisation. You
may have seen articles in newspapers about an organisation, its products and
policies. The other tools of publicity are press conference, publication and news
in the electronic media etc. It is published or broadcasted without charging any
money from the firm. Marketeers often spend a lot of time and effort in getting
news items placed in the media for creation of a favourable image of the company
and its products.
3. Personal selling : You must have come across representatives of different
companies knocking at your door and persuading you to buy their product. It is a
direct presentation of the product to the consumers or prospective buyers. It
refers to the use of salespersons to persuade the buyers to act favourably and buy
the product. It is most effective promotional tool in case of industrial goods.
4. Sales promotion : This refers to short-term and temporary incentives to purchase
or induce trials of new goods. The tool include contests, games, gifts, trade shows,
discounts, etc. Sales promotional activities are often carried out at retail levels.

INTEXT QUESTIONS 20.5

1. What are the main objectives of promotion? List them.
2. State the main factors affecting the choice of distribution channels.
3. Which element of the promotion mix is being referred to in the following statements.
(a) It is a temporary incentive to induce trial or purchase of a new product.
(b) It does not cost money but may involve considerable time and effort by the
marketeer.
(c) It is an effective promotion tool for machines, lubricant etc.
(d) Press conference, publications and news in the electronic media are its various
tools.
(e) It is a paid form of non-personal communication by an identified sponsor.

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(f) It is done through popular media like radio, television, magazines, newspapers
Management
etc.
4. Multiple Choice Questions :
i. To which tool of marketing mix does ‘Brand Name’ relate?
a) Product b) Price
c) Place d) Promotion
Notes ii. Identity the philosophy in management which suggests that aggressive selling
and promotional efforts are needed to sell product.
a) Production concept b) Product concept
c) Sales concept d) Societal concept
iii. A cool drinks manufacturing company is using chemicals to make its product
(cool drinks), name the marketing philosophy which is ignored here.
a) Production concept b) Product concept
c) Sales concept d) Societal concept

WHAT YOU HAVE LEARNT

• The mix of product, price, place (distribution) and promotional efforts is known
as ‘Marketing Mix’.
• Product is defined as anything that can be offered to a market to satisfy a want. It
not only includes physical objects and services but also the supporting services
like packaging, installation, after sales services etc.
1. Based on use, products can be classified as
(a) Consumers goods meant for personal consumption by the households
or ultimate consumers. Based on buying behaviour of consumers, they
can be further classified as (i) Convenience goods; (ii) Shopping goods;
and (c) Speciality goods.
(b) Industrial goods are meant for consumption or use as inputs in
production of other products or provision of some service.
2. Based on durability, products can be classified as
(a) Durable goods; and (b) Non-durable goods.
3. Based on tangibility, they are classified as
(a) Tangible goods, and (b) Intangible goods

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• Price is the consideration in terms of money, paid by consumers for the bundle of
Management
benefits he/she derives from use of product/services. The factors determining price
of a product are- cost, demand, competition marketing objectives and government
regulation.
• The different methods of price fixation are :
1. Cost based pricing : Price is fixed by adding a desired amount of profit
margin to the cost of the product.
Notes
2. Competition based pricing : Price is fixed keeping in mind the price of
competing brands.
3. Demand based pricing : Prices are determined by the demand for the product.
4. Objective based pricing : Here prices for new (innovative) products are kept
low. Where the organisation decides to skim the market, prices are kept
high.
• Channels of distribution are a vital link between manufacturers/producers and the
ultimate consumers/users. It includes the middlemen/agents engaged in the process
of transfer of title of goods. It helps in establishing regular contact with customers,
facility for inspection of goods, transfer of ownership and delivery, it helps in
financing, provision of after sales services and it assumes all risks connected with
the distribution function.
• The various channels used for distribution of consumer goods are :
(a) Zero stage channel : Manufacturer → Consumers
(b) One stage channel : Manufacturer → Retailer → Consumers
(c) Two stage channel : Manufacturer → Wholesaler → Retailer → Consumers
(d) Three stage channel :
Manufacturer → Agent → Wholesaler → Retailer → Consumers
• Factor affecting choice of distribution channel :
 Nature of market
 Nature of product
 Nature of the company
 Middlemen consideration
• Promotion is an applied communication used by marketeers to convey persuasive
messages and information between the firm and its potential customers.

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The different tools used for promotional activities are :
Management
1. Advertising : It is a paid form of non-personal communication through
different media about a product, idea, service or organisation, by an identified
sponsor.
2. Publicity : It is a non-paid process of generating wide range of communication
to contribute a favourable attitude towards the product and the organisation.
3. Personal selling : It is a direct presentation of the product to the consumers
or prospective buyers.
Notes
4. Sales promotion : It refers to short term and temporary incentives to
purchase or induce trials of new goods. For example, games, contests, gifts
and discounts.
• Production concept suggests to sell the product by producing inexpensive products.
• Product concept emphasises on production of quality products.
• Selling concept suggests to sell what is produced.
• Marketing concept insist of designing product according to the taste of customer.
It helps to give customer satisfaction.
• Societal concept insist to consider social goal with customer satisfaction.
• Branding is the process of using a name, term, symbol or design to identify the
product.
• Packaging includes all the activities which are involved in making a container and
protecting a product.
• Labeling provide a detailed information about a product.
• Various elements of promotion are advertising, sales promotion, personal selling
and publicity.
• Publicity is a non-paid communication which gives information about a product.

KEY TERMS
Marketing Mix Consumer goods Durable goods
Product Convenience goods Non-durable goods
Price Shopping goods Tangible goods
Place Speciality goods Intangible goods
Promotion Industrial good Advertising
Publicity Personal selling Sales promotion

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TERMINAL EXERCISE
Very Short Answer Type Questions
1. Define the term ‘Advertising’.
2. What is meant by the term ‘product’?
3. Give two examples each of tangible products and intangible products.
4. What are speciality goods? Give one example. Notes
5. Define the term ‘promotion’.
6. What do you mean by labeling?
7. What is the purpose of packaging a product?
8. What is meant by the ‘product concept of marketing’?
Short Answer Type Questions
9. What are ‘convenience goods’ and ‘shopping goods’. Explain giving examples
for each type.
10. Explain ‘cost based pricing’ and ‘objective based pricing’.
11. State four functions performed by channel of distribution.
12. Describe the various factors affecting choice of distribution channels.
13. What are durable and non-durable goods? Give two examples of each of them.
14. Write short notes on the elements of promotion.
15. State the functions of packaging.
Long Answer Type Questions
16. What is meant by Marketing Mix? Describe the four components of marketing
mix.
17. Describe the classification and sub-classification of products on the basis of their
use.
18. Explain the four broad methods of price fixation of a product.
19. ‘Promotion includes four main tools’. Explain each of these tools.
20. “Channels of distribution are a vital link between manufactures and consumers”.
Describe this statement with the help of diagrams by mentioning the four types of
channels of distribution.
21. ‘Developing the product according to customer needs is an important concept of
marketing management’. Explain briefly.
22. Differentiate between Publicity and Advertising.
23. Explain briefly the components of product mix.
24. Critically examine the objections of advertisement.

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ANSWERS TO INTEXT QUESTIONS
20.1 1. (a) Product (b) Price (c) Place (d) Promotion
2. (a) Price (b) Place (c) Marketing mix
(d) Product (e) Promotion
20.2 1. (a) Industrial goods
Notes (b) Consumer goods- shopping goods
(c) Consumer goods - speciality goods
(d) Industrial goods
(e) Consumer goods - shopping goods
(f) Industrial goods
(g) Consumer goods - convenience goods
2. (a) banking, insurance or any other suitable example
(b) car, washing machine or any other suitable example
(c) salt, pickles, soap or any other suitable example
3. (a) Tangible Intangible
(i) Cricket bat (iii) Boarding a bus
(ii) Ball (iv) Pollution check
(v) Pen (vi) Getting medical advice from a doctor
(b) Durable Non-durable
(i) Refrigerator (ii) Salt
(iv) Washing machine (iii) Soap
(v) Television (vi) Cooking oil
(vii) Sauce
(viii) Note book
20.3 1. (a) Cost (b) Demand (c) Competition
(d) Marketing objectives (e) Government regulation
2. (a) Cost based pricing (b) Objective based pricing
(c) Competition based pricing (d) Demand based pricing
(e) Objective based pricing (f) Demand based pricing

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20.4 2. (a) Zero stage channel of distribution
Management
(b) Three stage channel of distribution
(c) One stage channel of distribution

20.5 1. (a) arouse buyer’s interest in the product

(b) inform buyer about its availability
(c) inform him/her how it is different from other products
Notes
2. (a) Nature of market (c) Nature of product
(b) Nature of the company (d) Middlemen consideration

3. (a) Sales promotion (d) Publicity

(b) Publicity (e) Advertising
(c) Personal Selling (f) Advertising

4. (i) a (ii) c (iii) d

DO AND LEARN
Make a list of atleast five different types of products. Classify them into the product
categories that you have studied (viz. consumer goods, industrial goods, durable and
non-durable, tangible and intangible goods)

Find out about the type of channel of distribution that is used for these five products.
Also, find out about the promotional activities that generally associated with the products.

Note your findings and tabulate them as follows :

Name of Product category Type of channel Promotional

the product According to (a) use of distribution used activities
(b) durability and (c) tangibility

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ROLE PLAY
Mani and Prasad are good friends. Mani is a marketing executive working for an
MNC and Prasad is a small scale businessman making plastic toys:
Mani : Hi Prasad! How are you?

Notes Prasad : Hello ! Mani, nice to see you.

Mani : How you business going on?
Prasad : Not very well.
Mani : Why?
Prasad : For the past 3 years my sales turnover has not increased. It is quite
disturbing.
Mani : I understand, but tell me how is your distribution of the product done.
Prasad : I sell the toys in the local market and in the nearby town. I have a
dealer. Thats it.
Mani : No, you have to analyse your distribution channel. Let us sit down and
do some work. I think you should have at least three channels of
distribution.
Prasad : Why?
Play the role of Mani and explain to Prasad the three suitable channels he should adopt
for the plastic toys.

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